Master’s Degree
in
Marketing e Comunicazione
Curriculum: Innovation and Marketing
Final Thesis
The role of the entrepreneur’s
social ties in the different
stages of growth of an
innovative startup
Eight case studies in the food industry
Supervisor
Ch. Prof. Vladi Finotto
Graduand Arianna Cinel Matriculation number 853229 Academic Year 2019 / 2020
INDEX
INTRODUCTION ... 1
1 - NEW EVOLUTIONS IN THE FOOD INDUSTRY ... 3
1.1 Food domain challenges ... 3
1.2 Evolutions of Food supply chains: from upstream to downstream changes ... 5
1.2.1 One of the driving forces behind the evolution: IT and digital tools ... 6
1.2.2 Agriculture 4.0: the new digital farming approach ... 8
1.2.3 Smart packaging: the tool to convert a passive product into an active information carrier ... 11
1.3 The Italian food economy between huge potentials and slow-paced digitalization 16 1.4 Investments’ allocation in Italian food industry among incumbent firms and startups ... 20
1.5 Public policies in support of the innovation processes of food industry ... 29
1.5.1 Common Agricultural Policy (CAP) ... 29
1.5.2 National plan “Industry 4.0” and RDP ... 31
2 - THE START-UP ENTITY: DEVELOPMENT STRATEGIES IN INNOVATIVE CONTEXTS ... 35
2.1 Startup’s life cycle and finance dynamics ... 35
2.2 Startups and strategic networks ... 39
2.2.1 Accelerators and incubators: supporters in the first stages of an innovative start-up lifecycle ... 40
2.2.2 Venture capitalists and business angels: powerful networks with key resorces ... 44
2.2.3 Universities: main promoters of innovation ... 47
2.2.4 Large firms and startups ... 49
2.3 The Italian Startup ecosystem: demographic trends and public incentives to foster startups’ creation ... 57
2.3.1 Demographic, economic and financial trends ... 59
2.3.2 Demographic trends in the Italian agri-food industry ... 60
2.3.3 ISA incentives and facilitations ... 63
3 - SOCIAL CAPITAL AND ENTREPRENEURSHIP ... 73
3.1 Social capital theories in the business management literature ... 74
3.2 Ties’ typologies and characteristics ... 77
3.3 Social ties’ benefits for newly-born ventures ... 82
3.4 Human capital: a complementary driver of Entrepreneurship ... 86
3.5 Entrepreneur’s personality and the quality of social networks ... 88
3.6 Trust: a subtle dimension of social capital ... 91
3.7 Family and friends: primary strong ties for entrepreneurs in the early-stages of a new venture’s formation ... 93
4 - DESCRIPTION AND ANALYSIS ... 97
4.1 Description ... 97
4.1.1 Research cases ... 98
4.2 Methods ... 105
4.3 In-case analysis ... 106
4.4 Cross-case analysis ... 122
4.4.1 First typology of venture evolution ... 123
4.4.2 Second typology of venture evolution ... 129
4.4.3 Other typologies of venture evolution ... 131
CONCLUSIONS AND LIMITATIONS OF THE STUDY ... 135
1
INTRODUCTION
The agri-food industry has always been considered less technological than other sectors, as it is rooted in traditional methods of intervention and rigid structures of resources management. In this sector, it is not easy to create and implement innovative solutions but how can innovation break into the agri-food industry?
An answer may be through innovative start-ups. Innovative start-ups are primary actors promoting innovation processes. I selected them for my research to investigate how they develop themselves in slow-paced contexts and to deepen the role of founders’ social networks in their processes of evolution.
Therefore, I started analyzing the trends in the food industry in Chapter One to understand what are the main dynamics, areas of intervention and investment present in the fod sector. Agriculture 4.0, blockchain, cloud systems, QR codes and smart objects are concepts that are increasingly playing a crucial role in the worldwide and Italian agri-food scenario. After I had delineated the innovative evolutions in this landscape, I analyzed the start-up entity in Chapter Two, by identifying their lifecycle steps, their structure, the strategies they usually adopt, the actors with which they interact (e.g. incubators, accelerators, universities, venture capitalists, business angels and large firms) and the positive and negative factors influencing their growth. Besides, in Chapter Three I explored the interplay between start-ups’ growth and their ways of connecting to the external environement thanks to founders’ ties. As we will see, start-ups are poor in resources by nature, and this encourages them to exploit every single channel of interaction and communication they have to gain further assets and capital to accelerate their growth pace. That is why in this typology of ventures, entrepreneurs’ social networks are more important than in any other business typology. Strong and weak ties, heterophilic and homophilic ties, formal and informal ties: different types of relations with different rules, dynamics and resources conveyed.
To answer my research question, I selected eight innovative startups in the region of Veneto and I explored the way entrepreneurs have orchestrated their networking ties to boost their evolution. Through the collection of available documentation (e.g. websites, videos, social media, press, Linkedin) and semi-structured interviews, I firstly identified startups key events and secondly I detected what kind of contribution and effect social networks have had on them. Thanks to a qualitative method of analysis, I deepened the mechanisms of actions and decisions of founders to answer to my research question.
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1 - NEW EVOLUTIONS IN THE FOOD INDUSTRY
Agriculture plays a crucial role in every country’s economy, as it represents a powerful hub of resources and has a relevant impact on GDP growth of Western economies. Food sector is relevant both for its economic contribution, but also for the importance in the future perspectives of planet Earth. Globalization, global warming, climate change and fuel-based economies are threatening the preservation of livelihood resources. However, it has also a negative impact on sustainability, when it comes to intensive farming, in which the use of chemical substances leads to soil degradation and pollution of inland waters.
Further, it is important to underline the transformation happening at the level of consumers food experience both in terms of purchase and consumption. Their increasing attention toward food quality and safety raised the threshold of the parameters required.
1.1 Food domain challenges
As one might see, the current food capacity of planet Earth is not sufficient (Figure 1). The horizontal axis shows the ecological footprint1, which has an increasing trend; the vertical axis shows the food demand. Currently, the food demand in comparison to our planet’s capacity is not sufficient (the ecological footprint is twice the planet’s capacity) and a perpendicular shift is necessary, as increasing food demand will request an ecological print that the planet will not be capable of providing in the future. Therefore, the challenge is to satisfy the augmenting food
demand, respecting the ecological print by finding solutions to more than doubling agri-food
production.
Studies have demonstrated that food demand is expected to increase because of the rapidly growth of urban areas and it is predicted to grow by 60% and by 2050 it will presumably reach values between 59% and 98%. At the same time, global population will turn from 7 billion into 9,2 billion inhabitants (Bellini, Osservatori, 2018).
To satisfy this need, by 2020 global agricultural production should grow by 70% and it will not be possible to merely cultivate fields through intensification methods or the utilization of other agricultural resources (FAO, 2019).
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Agriculture seems to be the main supervisor and victim as well of the global warming: it is the primary source of livelihood, but in the same time, it erodes precious resources. For instance, it produces greenhouse gas emissions because of intensive farming systems, contributing to 24% of total harmful emissions produced globally (IPCC, 2014). Besides, the creation of new fields coming from deforestation produces carbon dioxide. Agriculture is then the principal source of water consumption and pollution, as it deploys fertilizers and manure that have a relevant impact on lakes, rivers and ecosystems balance. It accelerates even the loss of biodiversity because of deforestation, threatening natural flora and fauna. What it is necessary to understand is that current business models and harvesting systems are not proper to actual environment conditions (FAO, 2019).
Food demand is not the single challenge that agri-food industry has to face. Food safety is an issue that nowadays covers a fundamental role: consumers are more expert, interested and sensitive to products’ matters. They want to know the product’s origin, its production process, its supply chain and the working conditions that have been imposed. Internet and the growing economic wealth of countries have encouraged this trend that is rooted in the “modern consumer’s perception”. In fact, consumers are more aware of the relation between food consumption and allergies, diseases and obesity.
In Italy, for example, the “methanol case” has definitely changed how much consumers pay attention to food provenance and production methods. In March 1986, twenty-three people died or had serious damages (e.g. loss of sight), because of the introduction of methanol or methyl alcohol in wine. A decision that was due to the intention to increase the alcoholic content. Since then, in the wine and in the food industry, in general, a shift in the degree of customers’ interest happened: from a quantity-based offer, there has been a direction towards quality and value.
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In addition to the challenges firms have to face, there are even more concerns about sustainability: both in terms of customers’ desire and in terms of environmental preservation. One-third of food produced for human consumption is lost or wasted globally and the CO2 emissions must be reduced to protect biodiversity and control climate change (FAO, 2011). Further, counterfeiting emerges to be an additional challenge to food sector players. The value of counterfeit and pirated goods imported in Italy in 2016 is equal to 12.4 billion euros, which represents 4% of Italian imports of genuine goods. The top exporting countries are China and Hong Kong (China). 16% of goods imported to Italy were food products, lagging behind the first threatened sector, which is fashion (OECD, 2018).
A correlated phenomenon is Italian sounding. It refers to the foreign products that simulate to be Italian by using names, geographical attributes or trademarks that recall Italian country. This problem has emerged with the increasing “Made in Italy” brand importance, as it is associated to quality, expertise and excellence, which is why it has become something to emulate and replicate to obtain profit.
The turnover of Italian sounding threat was equal to 90 billion euros globally in 2017 (Assocamerestero, 2020). In 2018, over 100 billion euros were estimated as Italian sounding turnover in the food sector, with an increase by +70% in the last decade (Coldiretti, 2018). As one might observe, a multiplicity of challenges threatens food industry and Italian food industry especially. The increasing demand of food and at the same time its inability to answer to it. Further, the amout of information available for consumers and their increasing attention to food ingredients and safety have transformed the scenario in which agri-food firms play. Therefore, agri-food firms are evolving to new management systems, adopting innovative and digital solutions in their supply chains.
1.2 Evolutions of Food supply chains: from upstream to downstream changes
The agri-food industry is striving not to fall behind to continuous challenges brought from market evolutions. New industry requests, new parameters and threats coming from the global market have led to changes in their supply chains. For instance, new disruptive technologies to ensure traceability, to guarantee the optimization of resources (e.g. fertilizers, water) and sustainability are being adopted, or the possibility of exploiting the collection of data to take more informed decisions.
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1.2.1 One of the driving forces behind the evolution: IT and digital tools
Some of these new market evolutions and requests find solution in disruptive technologies. When it comes to agri-food industry transformation, we can talk about smart food economy. «The smart food economy assumes the intense use of information and communication technologies and innovative digital solutions [..] for complex planning and management of food production and distribution processes» (Kosior, 2018).
This cutting-edge aspect gives birth to the “digital twin paradigm”, where processes, systems and networks have a reflection (twin) in a virtual world (Uhlmann, 2017). It leverages the intangible dimension of structures around a potential or finished product, analyzing components at the micro level initially, ending with the final consideration of the complete structure at a macro level (Grieves & Vickers, 2017).
A massive collection of data and information during processes is grouped and categorized to give a concrete representation of what is going on and what has happened within supply chains. The introduction of these new digital technologies deserves attention: the volume of investments was about 6.8 billion dollars in 2017. Usa at first place, followed by China, Germany, India and the United Kingdom. Europe invested approximately a billion dollars and it is augmenting its digital process reaching a share of 30% on total investments (Bellini, Agridata, 2019).
The realization of a smart food system is based on four essential elements: Internet of Things,
Big Data, Cloud computing and blockchain.
IoT are objects that are connected to Internet and merge the real world with the virtual one, aiming at finding solutions that enable monitoring and control of mechanisms and the transfer of information to support decisions real time. IoT may contribute to the augmentation of coordination between the nodes of the supply chain, but also can mitigate the demand-supply gap, reducing waste and monitoring food processing to respect food safety regulations.
IoT collect and store large amount of data. In fact, the introduction of these digital technologies (robots, sensors, drones) has made possible the collection of large amounts of data, not only in terms of quantity, but in terms of variety and speed. Traditional structured data are collected in addition to unstructured data, such as images, videos, signals, text files; partially structured and hybrid data, geo-localization data, multimedia data, residual data and social media data (Mayer-Schonberger & Cukier, 2013). For this reason, nowadays we talk about a data-driven approach, because information resources are multiplying, as well as tools to exploit them.
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Agricultural firms usually answer to environment and conditions changes slowly; this may affect the effectiveness of reactions. That is why data evaluation and processing needs to be
real time, so that they may provide the possibility of reacting to events quickly, in a more
reactive and accurate manner.
The extraction of powerful information to support decisions is the result of a process of transformation, categorization, modeling and visualization of data that is more and more complex, but thanks to Big Data analytics and innovative tools like cloud computing, artificial intelligence and automation, it is now easier to enhance the speed between data collection and exploitation (Kosior, 2018).
Big data content provides a series of advantages (Mikalef, Pappas, Krogstie, & Giannakos, 2017):
a broader spectrum of insight into production processes;
finding correlations and new relations between variables and facts; increasing production efficiency;
improving products quality;
ability of forecasting supply and individual demand of products; traceability;
anticipating failures and breakdowns of machinery; improving product lifecycle management;
limiting waste;
estimating the impact of daily production on financial results.
All of these benefits can be achieved if Big data analytics goes with Cloud computing. It represents one of the most important and powerful systems to which firms are paying attention nowadays. Cloud computing may be defined as a tool enabling to access to a set of resources, which are capable of elaborating information, such as networks, servers and data stores easily and rapidly. Cloud computing entails to create a more flexible system on demand, which may be expanded dynamically according to firms needs. Besides, it ensured the collection and the elaboration of huge amounts of non-structured data automatically (Secchi & Rossi, 2018).
Blockchain, as well, is an innovative and transversal tool that may be applied over the entire
supply chain. Supply chains are traditionally structured and organized, involving a multiplicity of operators with specific and different tasks. The values of this tool can be resumed in four terms: security, transparency, immutability and approval. It is a safe register based on precise
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and unbreakable rules; it is transparent because information is accessible to every participant, so that the relationship between producer and consumer is not characterized by the so-called information asymmetries. Furthermore, it is a “democratic” tool, as participants must approve all changes and it is immutable because what enters the blockchain cannot be modified in an arbitrary manner: it is incorruptible (Gavatorta, 2019).
The main characteristics that a blockchain operating in the agri-food industry should have are: easiness of application;
flexibility;
access to data allowed to qualified operators; interconnection with other blockchain;
possibility of acquiring information from official databases.
1.2.2 Agriculture 4.0: the new digital farming approach
The most important and crucial phase in the development of an agri-food supply chain is farming. The introduction of modern machinery, automation systems and ICTs on the supply chain is reshaping totally the way an agri-food enterprise works, not only because new technologies are able to make the enterprise more productive, efficient and competitive, but also because there are some changes happening outside the supply chain. For example, new requirements in terms of sustainability and customers’ purchase trends.
It is possible to talk, then, about “Agri-food 4.0”. Obviously, this issue is directly related to the new concept of “Industry 4.0”, where production processes, logistics and distribution are managed and regulated in a digitalized system that relies on the tools mentioned in the previous paragraph: IoT, Big Data and Cloud computing (Santucci, Martinez, & Vlad-Calcic, 2012). Agri-food 4.0 relies on several elements: cyber-physical systems and precision technologies like smart sensors, drones, robots, intelligent greenhouses, wireless sensor networks and vertical farms (Yahna, 2018). In this context, the enterprise is not only a sensing and smart
enterprise (S2 enterprise) with receptive skills and flexibility, able to detect events, collect data and monitor internal and external changes. It is also sustainable in its actions to optimize processes, minimize environmental impact and the waste of resources. The identification of the new concept of the sensing, smart and sustainable enterprise is called S3 enterprise
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The so-called precision farming and smart farming (or Internet of Farming) have been gradually modifying the way agri-food enterprises organize themselves.
Precision farming (or precision agriculture) is about monitoring, controlling and regulating management processes of a soil. It is characterized by the utilization of basic sensors: drivers able to carry out data collection, from so-called field record files, in a precise and targeted way and transform it into digital data. In fact, aerial mages are taken by drones (georeferencing), which provide useful information about fields, for example unwanted plants, diseases and crop quantity. It is possible to monitor temperature, vehicles movement, air quality and humidity. According to a study of the European Commission about farm machinery, between 70% and 80% of agricultural equipment sold contains components of Precision Agriculture (PA). The business involves 4.500 manufacturers, implementing 450 different farming machinery solutions for an annual turnover of €26 billion (European Commission, 2017). However, according to OnFarm (a connected farm IoT provider) the amount of data farms will produce by 2050 will be equal to €4.1 million (European Commission, 2017).
Smart farming, instead, goes beyond the concept of Precision Farming. It is not only the precise measurement and control of a set of variables related to farming processes. It focuses on the collection of data and its application in a smart way. The sensors ability to collect data about an object and give information about one of its variables (e.g. temperature, movement, ..) is implemented and transformed into an element, entering a more complex system and being uploaded in a cloud platform to let complex farming systems start (Newman, 2018). Thanks to the usage of these field robots and smart sensors is possible to collect data about weather, humidity rate, the condition of soil and plants, terrain, fertilizers quantity, resource usage for example, and this is collected, processed and evaluated through AI systems (Giesler, 2018). After that, since these devices are cloud-controlled, it is possible to regulate precisely and efficiently the quantity of treatments, fertilizers, pesticides and the removal of individual weeds. This virtual system turns real when DSS (Decision Support Systems) provide farmers with elements useful to take decisions.
Precise control electronics enable the communication among agricultural machines as they access field-record files. The revolutionary aspect is that farmers can manage the whole system through online platforms and agricultural apps: it is an interconnected system where data and operations are accessible real-time.
10 Figure 2 shows the mechanism of smart farming.
In conclusion, Agri-food 4.0” enables a series of benefits that may be divided with respect to their social, environmental and economic impact (Miranda, Ponce, Molina, & Wright, 2019):
ECONOMIC ENVIRONMENTAL SOCIAL
Agri-food networks Higher profits
Agricultural employment Monitoring of production
output
Better food quality Optimization of use of
resources
Clean energies
Lower ecological impact Loss of genetic diversity Reuse of resources Reduction in emissions Reduction in waste
(fertilizers, pesticides, water) Facing overuse of water and
damage to hydrological systems Monitoring of field conditions Food safety Health impact Cost-saving Livability
Use of local resources Local and regional
institutional actors Improvement of working
conditions Traceability Transparency
Table 1. Benefits of Agrifood 4.0. (Miranda et al., 2019)
IoT together with other devices entail new levels of operational control and executing planning and enable a series of connections with other external subjects. When new actors are involved in the supply chain, the business ecosystem becomes more complex (European Commission, 2017). But this opportunity to communicate and exchange powerful information, thanks also to other systems like the blockchain, cloud platforms and Big Data analytics, give additional features on the transactions occuring between producers and manufacturers. All these aspects enter a virtual system that is visible to all the players and participants of the network. In this way, consumers as well will be part of the supply chain.
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1.2.3 Smart packaging: the tool to convert a passive product into an active information carrier
To manage and control food quality, it is possible to talk about smart packaging. Smart packaging materials are substances or materials that have the function of controlling the conditions of packed food or their surrounding environment. Smart packaging may also consist in an inexpensive label printed on primary packaging, like trays, pouches, bottles or shipping containers, which contribute to provide precious information among actors throughout the supply chain. These sensors control temperature, humidity, light, ethylene, chemical contaminants, pH, and give an alert whenever the presence of these variables is too much or too little. Through oxygen scavengers it possible for example prevent colour change, growth of microbes and eliminate flavors and odors, but the majority of applied sensors are applied to make clear the causes of quality problems or damages afterwards (Yam, 2009).
Besides, RFID2 and bar codes represent the most used product identification systems. The
management and the analysis of data collected through these tools can be processed by a Management system and, thus, it is possible to track a product, by memorizing in each TAG all the data linked to its production/distribution history (Qualivita Foundation, 2018).
Further, QR Code and Datamatrix represent two mechanisms that can be used to convey information. QR Code is a matrix bi-dimensional bar code, composed by black modules placed in a white squared scheme. Datamatrix, as well, is a matrix bi-dimensional bar code, composed by black and white cells or modules within a rectangular or squared scheme. In this technology, information consists of text or raw data and it is suited to professional tracking or alimentation databases. These technologies are able to identify origin and the steps in the supply chain of a product (Qualivita Foundation, 2018).
The disruptive technology that is rapidly spreading even is the blockchain. Thanks to a QR code or a Datamatrix, the blockchain is able to identify all the product life cycle within the supply chain in a quickly and cost-effective way.
The advantages of the blockchain are transparency and responsibility, the possibility of monitoring the best practices, origins and integrity of manufacture (Qualivita Foundation, 2018).
2 RFID is a technology based on three components: TAG, Reader and Management system. The identification of the product happens through the radiofrequency, memorizing autonomously data and information via TAG and Reader. The TAG is an electronic component based on a microchip connected to a satellite. If the tag is passive, when it is near a Reader, emitting a radio transmission, the TAG’s microchip turns on and answers back transmitting information that it holds. When the TAG is active, a battery allows sending/receiving information even without the induction process generated by a Reader.
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All these tools, associated to IoT, ensure logistics systems more control and traceability, but at the same time enable the monitoring of food quality by supply chain actors, as well as final consumers. As in the case of IPNLF (an international organization operating in the fish industry), where it implemented the blockchain system within the cooperation of a startup named “Blockchain Provenance” in order to track the whole supply chain of tuna fish (Bellini, Osservatori, 2018). The project involved eight firms, which joined actively the supply chain in the phases of production and distribution. The final goal was providing security about origins and social sustainability across two Indonesian fish providers. Before this change, anglers collected data about their activities and products through paper or Excel files, then sent them to firms responsible for processing and distribution, but this method did not ensure the observance of environmental and food safety regulations. Indeed, blockchain method provided a series of advantages:
Simplification of data collection, by reducing waste of time; Improvement of data quality;
Reduction of data duplication;
New levels of warranty about data reliability;
Enhancement of commercial opportunities, by creating a new relationship of trust between producers and consumers, since the latter can access information easily and rapidly by scanning a QrCode.
1.2.4 The new Food experience
Final consumers’ behavior has remarkably evolved over years. New technologies and the globalization, together with social and demographic changes, have been influencing the food sector and its dynamics (Meyer et al., 2002). The scandals food companies have been exposed to, has boosted consumers’ mistrust and the need for transparency. Transparency does not consist only in the communication of the product’s characteristics, but a concrete proof about products’ origins, supply chain, actors involved and ingredients to produce the final product is required. The aim is in fact creating awareness on the aspects consumers are interested in, such as safety, quality and environmental, social and ethical issues. Consumers, in fact, are orienting their purchases towards companies that are investing in these policies and are showing to be more sensitive.
In Italy, for instance the attention towards healthy and environmental-friendly products is increasing, especially for organic industry.
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The role of the Internet is fundamental in this issue: it is rapidly changing the communication between consumers and businesses, where the latter are leading more consumer-centered policies. In fact, the consumption patterns are changing: 5,1 billion people out of 7,6 are mobile users, who actively search information of what they see and consume; over 4 billion people search on the Net and 3,2 billion people are active social media members (Qualivita, 2019). In fact, the easiness with which customers have access to information, reviews and feedbacks about products and brands is reshaping the configuration of competition. Thanks to tablets and mobile apps, companies can leverage digital channels to enhance communication strategies to decrease the gap between them and consumers.
Consumers are actively searching for details about ingredients and nutritional values to discover the quality and healthiness of the product. They expect to know if products contain allergens, OGM and if they are produced respecting work conditions. Producers should change their policies then, paying attention the several criteria: production, origins of raw materials and distribution. Their need to know what they are going to consume creates a sharing vision, where data must be accessible through websites optimized for mobile use and smart labels (Zanotti, 2019).
Traceability as well results to be a relevant matter for consumers. It is not only important to
supply chain actors, but it is becoming an influencing factor also for consumers’ decisions. Traceability does not mean only rebuild the product journey from upstream to downstream, but it means to identify the history beyond a product and therefore, be able to recognize the values it brings.
For this reason, consumers play active roles. This phenomenon mirrors Augmented Reality (AR) and Mobile Augmented Reality (MAR): through smartphones it is possible to involve consumers not only in an informational process, but also in a “vivid” experience (Penco & Profumo, 2019). RFID, QR code and blockchain are again main characters. They provide an answer to the need for a larger amount of information required by final consumers and enable the creation of transparency and food safety. Consumers can scan Qrcodes printed on the packaging, be connected rapidly to a website or a Youtube video in order to gain information about the product: its origin, its journey and its authenticity overall.
Besides, through AR and MAR the distance between consumer and the brand shortens, creating a major level of interactivity not only in terms of the utilitarian value (information about the product) but also in terms of the hedonistic value. By offering consumers an experience and the chance of sharing it with their social networks, agri-food firms may enhance the social value of
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the product. If a firm is capable of integrating social elements with Augmented Reality tools, it improves the solidity of the link between the brand and other markets, and consequently, the attractiveness of the product itself. Augmented Reality conveyed through smartphones may help consumers to take more conscious choices: both at the purchase and at the consumption phase (Penco & Profumo, 2019).
Consumers’ needs for authenticity creates a benefit even for the producer that can better fight counterfeited products. In fact, countries like Italy, which are leaders in some industries, such as fashion, agri-food and luxury, are victims of phenomenon like Italian sounding and counterfeiting. The former is bound to products that try to imitate Italian brands or geographical denominations like cities or regions (for instance “Ferrari Rocher” produced in China, “Parmesan Cheese” produced in the United States) but this is not actionable. The latter concerns illegal acts due to the violation of a registered trademark, a denomination of origin (DOP, IGP), a logo, a product design or copyright or the imitation of the product itself. This phenomenon is legally challengeable and actionable (Federalimentare, 2016).
In the end of 2018, the economic value of “Fake products” in the agri-food amounted to over 100 billion euros, with an increase by +70% in the last decade (Coldiretti, 2018). QrCodes, Rfid and Blockchain can make the difference. By scanning codes on the packaging, it is possible to verify its authenticity. In this area, some apps tapped the market: “Trust your wine”, “Wine blockchain EY” and “Foodchain”. Three digital solutions that allow consumers to verify the product they want to buy through QrCodes and blockchain. Other firms undertook other strategies, fox example printing an alphanumeric code on the product: the consumer can access to the website of the producer, enter the code and examine the whole journey of the product “from-field-to-fork”. Tuscany Oil DOP is one of those adopting this strategy: it wants to ensure that customers can properly verify the quality of oil bottles, appreciate their value and pay the benefit that it encompasses.
These technologies are being used even to replace the payment phase. Retailers are increasingly considering the digitalization of payments transforming it into an intangible system; in fact, they are adopting smart shelves. It means that the customer has to read the “smart label” through QrCode or NFC, pay and then get out from the shop without stopping at cash desks. The phenomenon has already started with Amazon, the empire of online logistics and distribution. The final aim is not only making the purchase more rapid and easier, yet making the shopping experience more immersive (Oldani, 2019).
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Other trends that food sector is living are e-commerce and food-delivery phenomena. The increasing impact of digital technologies has been creating, on the one hand, higher levels of information among customers; on the other hand, it has enabled to enhance the interaction between firms (or restaurants) and final customers, boosting the former to review their business models and the latter to develop new purchase behaviors. The traditional retail has moved to online tools (like apps, websites and social media) enabling people to buy online with no necessity to go to the physical store. Further, beyond e-commerce, another concept has emerged: the food-delivery. Food delivery represents a service that facilitates the food purchase. Buying food through the use of a website or an app and receiving it in the desired place has boosted easiness of consumption and, for restaurants, an access to many more potential customers. This change in food consumption has spread globally. In China, for instance, more than one fifth of the population has used food-delivery applications (Cho et al., 2019); in Korea the number of food-delivery apps has greatly increased moving from 870,000 apps in 2013 to 25 million in 2018 (Joins, 2019). The concrete impact of these phenomena confirms again the relevance of digitalization in the way firms do business and in the way customers interact with them.
As it is possible to see, the innovation elements in the food sector are reshaping the way we know products, the way we buy products and the way we consume them. Internet has made possible a series of actions that consumers can execute to minimize the information asymmetry that has always characterized the relationship between producers and customers.
Firms must exploit the increasing digital predisposition of customers; they should reorganize their assets and optimize the communication touchpoints that could enhance their brand image and perception. Hence, the development of the Internet and mobile communication have boosted processes of innovations, leveraging the capacity to acquire, store and archive large amount of data and exploiting it to support decisions and processes regulation. This has revolutionized business models and organization combining the different effects and obtaining a disruptive impact, with respect to not only firms’ structure, but also their approach across the supply chain, the actors involved in it and external stakeholders, such as customers.
Firms who will be ready and flexible to adopt new digital technologies in the production and distribution fields and who will change their approach to consumers will be part of the expected expansion of 15 billion euros for the next three years (2019-2021). It is necessary to lead changes in particular aspects. First, adopting a consumer-centric vision may encourage a growth in revenues by 22-25% for those who have led policies in this direction. Second, creating
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synergies among actors involved in the innovation process may boost an increase in revenues by 36%, especially for those who have invested in strategic collaborations or have started strategic business reorganizations. Finally, enhancing a constant strategic communication about firms’ values and quality will turn into an augmentation in revenues by 40%, multiplying business opportunities (Deloitte, 2018).
1.3 The Italian food economy between huge potentials and slow-paced digitalization
When analyzing current trends, it is remarkable that food enterprises are giving a valuable contribution to Italian GDP: the production value represents more than 17% of the total Italian GDP (year 2017) and the export value corresponds to 68% on the total (EY, 2017). This data relies on qualitative and quantitative researches led on 8.000 international consumers among twenty-seven countries worldwide that can access Italian products. According to this report (EY, 2017), food industry is one of the most powerful Italian industries together with fashion and tourism. 73% of international consumers link “food” when thinking of Italy. Considering the sample studied by an EY study (2017), only 32% of consumers are aware of “Made in Italy” brand, but 65% state to be strongly interested in understanding the product origins and its peculiarities. In conclusion, foreign consumers have a tendency to know something more about the Italian product, not only the label, but its story as well. In contrast to this aspect, only 42% of Italian firms know what consumers want and this is a consequence of a wrong perception of “Made in Italy” brand abroad. This brought Italian firms to invest incorrectly in technologies and not to give the suited attention and interest to this target group, which is actually the most profitable growth driver. 75% of Italian firms adopted CRM systems to collect information about customers; only 48% bought tools to track the whole supply chain and only 23% manage in an accurate manner and at a “local” level their communication strategies (EY, 2017). In Italy, the number of firms involved in the agri-food industry is about 8.300, reaching a revenue of approximately 125 billion euros and a number of employees that overcomes 340.000. In the arch of time between 2012 and 2016, the industry turnover increased by 22% (Deloitte, 2018).
When comparing Italy to other European countries, it is remarkable that Italy arrives first in terms of food purchase, overcoming France, Germany and Spain. Italy shows € 2.428 spent per year per capita in 2018 with respect to France (€ 2.353), Germany (€ 2.019) and Spain (€1.817).
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For what concerns food purchases incidence on general expenses, again Italy shows relevant data: 19% of expenses are bound to food; Spain comes first with 20% of food expenses; France follows with 18%; Germany and United Kingdom come after with respectively 14% and 12% (OECD, 2019).
Agri-food industry, as emerged in an Istat study (2018), is under the average of other sectors’ investments. Approximately 64% of firms declared to have done investments in 2017, 3 percentage points less than the average (Istat, 2018). Considering that Italy’s strength relies significantly even on this sector and its trend is continuously growing although the recession period, investments and innovation processes are necessary to tap into new markets and improve firms’ competitiveness. Differently from food industry, beverage industry is instead showing a more attention on digital technologies to cut production costs and apply more modern and state-of-the-art production processes.
The wine industry, instead, is an important market in the Italian landscape. It has begun a growth path for several years, contributing to strengthen Made in Italy quality and reputation worldwide. The production value has grown by 4,5% in 2017 with respect to the growth rate of 3,8% of the previous year. Data reflects a reduced amount in terms of the harvest volumes, but with higher prices. Besides, the amount of wine volumes in the first three months of the year were +8% than the volume in the same arch of time in 2018. Almost 4,9 million hectoliters were shipped abroad (ISMEA, 2019).
The sector certifies resilience and a general growth due to export overall, which focuses on a strategy that leverages quality and values. With its 1 billion exported bottles in 2015, it results to be a well-structured and mature industry, traditionally configured but ready to face global competition.
The study carried out in the wine sector (Cisco, 2017) demonstrated positive trends toward innovative strategies. It was realized via a structured survey starting from key factors emerged from the industry mapping. The wine sector is a good sample, as it has a homogeneous setting within the Italian domain and firms composing this scenario show integrated supply chains: from grape production to bottling operations, to distribution and sale of the product. The trend of innovation investments resut to be quite positive, even though there is not an immediate and stable approach to digital technologies. Besides, the structural characteristic of the wine scenario is the fragmentation. In fact, the majority of Italian firms’ turnover lies between 10 and 25 million euros (Bonfante, 2019).
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E-commerce and food-delivery represent two phenomena that are pushing firms toward exploring new ways of reaching final customers leveraging digital solutions. Two tools that are revolutionizing the product’s purchase and consumption. In Italy food delivery market has gained a positive pace as well, reaching an increase by 56% in 2019, creating an economic value equal to € 566 million (Simone, 2019). E-commerce as well has resulted to grow dramaticallty over years: in 2018 the turnover of food e-commerce was equal to € 1.16 billion (2,8% on the total e-commerce, whose revenue has reached € 41.5 billion (Casaleggio Associati, 2019).
As one might observe, food industry demonstrates a valuable importance in the Italian economy and although new policies and technologies are transforming the Italian agri-food scenario, the current situation is not thriving, with respect to other countries’ perspectives in innovation investments. Actually only 1% of Italian crops are managed with digital systems for instance (Bellini, Agridata, 2019). The weaknesses of infrastructures and the lack of integrated supply chains do not enable the orchestration of resources and the optimization of production processes. In fact, according to a report written by the Digital Transformation Institute, in collaboration with Cisco Italia (2017), an overall picture about the phenomenon is missing and this makes difficult to spread the awareness about the opportunities of technology throughout the industry, and the urgency to exploit them to be competitive globally.
A first disadvantage of Italian agricultural firms is the average dimension, which is estimated as 12 hectares of extension in Italy. They are a lot smaller than other European countries average, in fact, the average UAA (Utilized Agricultural Area)3 of Germany and France is about 59 hectares and Spain follows with its 24 hectares average. In the period of time between 2014 and 2016, Italian total UAA, equal to 12 million hectares, was 25% lower than Germany’s, half of Spain’s and 45% lower than France UAA. Although these negative indicators, Italy achieved good results in terms of added value (€ 30 million with respect to France, Germany € 25,55 million and Spain € 25,50 million) and export, but in order to strengthen the positive development it is necessary to stop the reduction of UAA, favor competitiveness by boosting the digitalization processes and promoting the generational turnover (CSConfagricoltura, 2017). Firm dimension has increasingly begun a relevant factor in the competitive area, especially with respect to two elements: technological innovation, which represents a facilitator in market penetration activities and changes in the competitive landscape (Josefy, Kuban, R.D.,
3 UAA is the total area taken up by arable land, permanent grassland, permanent crops and kitchen gardens used by the holding, regardless of the type of tenure or of whether it is used as a part of common land.
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& Hitt, 2015). These two variables are linked to social and institutional factors, and the global connotation of the market, because the firm can survive if it is capable of adapting itself to external variations.
The creation of strategic synergies between several actors in the same supply chain is a strong opportunity: putting together a set of skills and know-how overcomes the potential result that is achievable individually. In fact, small and medium-sized firms do not have often the sufficient financial resources to invest in digital technologies.
It is relevant to underline that 38% of Italian farmers are over 65 years old, in comparison with the younger Spain (30%), France (13%) and Germany (5%) (CSConfagricoltura, 2017). This indicator shows a remarkable signal representing the lack of a generational turnover, which limits open-mindedness to innovation processes.
Limited knowledge emerges as another problem facing innovation proceses. The increasing
amount of qualitative and quantitative data to be processed and converted into information to be capable of take decisions rapidly, even real-time, is delineating new levels of independence. Operators need to be more autonomous in their actions, without asking to their organizational managers, so they should have specific executive and management skills, as they are responsible for taking some operating decisions, relying on a correct interpretation of the data provided by machines (Secchi & Rossi, 2018). In fact, one of the main reason why Italy stands behind is the lack of technical personnel capable of implementing innovation processes. Comparing the number of Italian students enrolled in ITS (Technical Higher Education) institutes and those of other European countries the difference is relevant: 10,000 in Italy compared with 760,000 in Germany, 530,000 in France and 400,000 in Spain. In 2018, other incentives were in the pipeline, with the aim of training 20,000 ITS students by the year 2020 and reaching the amount of 100,000 students (Peschiera, 2018).
In the agri-food industry, it is more likely that a qualification in agricultural studies pushes to major chances of adopting Agriculture 4.0 solutions, rather than other degrees.
In Lombardia (Northern region in Italy), in the analyzed sample those farmers adopting digital solutions have a degree in 57% of cases and in 64% of cases they have a degree in the agrifood area. In Piemonte (Northern-East Italian region), 42% of farmers are graduated and it gets to 56% of cases if the qualification is about agriculture. In Emilia Romagna (central region), 50% of graduated individuals operates in the agricultural field and rises until 80% of cases if they have a qualification in agricultural studies. In Veneto, otherwise, the percentage is smaller: 47% of cases are graduated subjects, but only 29% with a specialized degree in agriculture (Bellini, 2019).
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1.4 Investments’ allocation in Italian food industry among incumbent firms and startups
In Italy, investments in innovation are present mostly within the industrial sector, where large firms have larger funds to invest and more developed R&D activities that may produce new solutions.
Actually, the food industry is facing an evolution. The pushing characteristics are not only related to the growth rate. Just considering Italy, the industrial agri-food production has augmented by +1,1%, while total revenue has increased by +2%, reaching an amount of 140 billion euros. The export amounts to 33 billion euros, with a positive balance of over 1 billion (Federalimentare, 2019).
According to a report about agricultural activities published by the Smart Agrifood Observatory (research laboratory of the School of Management of Politecnico of Milan), in collaboration with RISE Lab (Research & Innovation for Smart Enterprises) of University of Brescia, the growth of Italian digital innovation is between € 370 million and € 470 million with a positive progression of +270% between 2017 and 2018 (Bellini, Agridata, 2019).
The Italian positive expansion mirrors a global increase in investments in agriculture 4.0 that amounts to $ 7 billion, almost twice the value of 2017. Europe plays a remarkable role in this evolution, representing 30% of total investments, equal to € 1,9 billion. In this scenario, Italian investments reach 19% of European ones and 5% of global investments.
The market growth comes consequently from an increase of technological offer, provided by more than 110 providers, both incumbents and new entrants. The offer is oriented to products and solutions that deal with precision farming, with a crucial role played by Internet of Things. These elements are present amounting to 44% of total offer, enabling data collection activities and analysis for Agriculture 4.0, existing in 71% of solutions. Connected and digital vehicles and equipment, working in Cloud, are becoming increasingly present, but they have not become structural part of agricultural activities yet, reaching respectively 21% and 6% of total cases. As we can outline in the Figure below, firms are more oriented to Precision Agriculture than Internet of Farming. In fact it amounts to 14% of technologies provided, as an average between “Machinery integration” (2%), “Resources management” (16%) and “Activities management” (15%) (Bellini, Agridata, 2019).
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The overview presented by the Smart Agrifood Observatory in 2019 mapped 110 Italian firms, including both incumbents (74% of total cases) and startups (26% of total cases).
Among the 110 firms, 49% works in the supply of cutting-edge solutions based on Internet of Things and robotics. Besides, 22% of solutions focus on agridata and provide data analysis solutions. In the 16% of the sample, there has been an introduction of precision field equipment; 7% focuses on electronic components and tools and 3% offers innovative tools to work on fields. 30% 21% 20% 17% 16% 15% 14% 8% 7% 2% 0% 5% 10% 15% 20% 25% 30% 35%
Fields mapping and monitoring Field and agronomic variables analysis Machinery and equipment monitoring Resources management Activities management Fertilization Precision utilization of herbicides Precision irrigation Harvest monitoring Machinery integration Internet of Farming = ► 0% 10% 20% 30% 40% 50% 60% Internet of Things and robotics Agridata and analysis Precision field euipment Electronic tools Field equipment
Figure 4. Fields of application of advanced solutions. (Bellini, Agridata, 2019) Figure 3. Technological offer for Agriculture 4.0. (Bellini, Agridata, 2019)
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53% of solutions are not oriented to specific areas, of which usage may be general and flexible according the different needs of users, while 24% refers specifically to cereals sector, 24% focuses on fruit and vegetable industry, 16% operates in the wine compartment.
Further, a focus on Agriculture 4.0: Precision Agriculture especially, as Internet of farming is growing slowly. These new practices are applied by 55% of agri-food firms involved in the analysis.
The way of exploiting the potential of disruptive technology is different: firms prefer mostly traditional technologic solutions where human contribution is essential, rather than autonomous technologies to transform data into digital information (Figure 5).
New consumers’ requests and public policies boost agri-food industry towards traceability criteria and food quality. Those firms that had adopted digital solutions affirm they have reached positive results: 38% declared to have improved their production processes effectiveness, 32% saw their efficiency improved (Bellini, Agridata, 2019).
Besides, the analysis of the Smart Agrifood Observatory went further considering a sample of 1.467 agri-food Italian firms in 2018 (Bellini, Agridata, 2019). The feedback has been positive: there is a high sensitivity towards digitalization and innovation. 85% of the sample declared to be aware of the importance of digital innovation in this industry; 55% is concretely setting up this transformation. The reasons that convinced firms to start the digital process are the increase in the production volumes and the control and the reduction of costs.
The sensitivity toward the value of data is increasing, but it is still not a priority. 45% of firms have been investing in digital solutions for five years, strengthening their skills, knowledge and
8%
62% 30%
Hardware Software Combined technologies
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strategic perspectives. The sample represents an entrepreneurial power that is rather “young”, with an average age range between 30 and 40, having a university degree; even though the study did not underline any correlation between age and academic qualification in the choice of setting up a digital transformation.
Further, 65% of firms over 100 hectares have adopted digital solutions, while 25% of firms under 10 hectares. This element confirms the crucial aspect of dimension: the more a firm is large and has more funds, the more it is likely that it will invest in new technologies (Bellini, Agridata, 2019).
Start-ups role is essential in every country economy and development, especially in contexts where crisis threatens prosperity and growth. In developed economies, like Italy for instance, a remarkable component of GDP and employment is linked to the evolution of new businesses. Kauffman Foundation underlined that 40% of USA GDP in 2010 was generated by enterprises with less than 30 years of activity and that, between 1980 and 2005, almost all jobs were results of enterprises, being on board less than 5 years. Deutsche Bank, as well, carried out a research where the incidence of venture capitals investments in startups equal to 0,1% corresponded to an increase in GDP by 0,3 percentage points (Digital360, 2012).
The most burgeoning industry where it is likely that new businesses will surge is the digital one, which means ICT technologies. This field is taking a positive pace currently.
In the agri-food sector, start-ups are asked to play a determinant role. On the one hand, they are main characters in the development of new products and services, on the other hand they are promoting innovation under different levels, being supported by processes of Open Innovation, especially in the processing industry. According to the Italian Smart Agrifood Observatory (Bellini, 2019)4, start-up are real hubs, able to outline new business models and develop innovative solutions and products. The start-up ecosystem is definitely essential to map and underline future perspectives of Smart Agrifood and Agriculture 4.0. The research led by the Observatory in 2018 analyzed all the innovation and digitalization-oriented firms in the agri-food industry both in Italy and worldwide.
A positive trend had been outlined: there are positive numbers considering both the quantity of start-up involved and the typology of products and services offered. Smart Agrifood
4 Bellini, M. (2019, February 9). "Significato, esempi e applicazioni pratiche". Retrieved from Internet4things: https://www.internet4things.it/iot-library/internet-of-things-gli-ambiti-applicativi-in-italia/
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Observatory carried out an inventory of all start-ups between 2011 and 2017, identifying 481 new international enterprises (Bellini, 2019)5.
In this group, Italy is well represented with a percentage of 11%, but with an average amount of financing sources that is a lot lower than other international start-ups. The analysis pointed up three valuable numbers:
Italian startups are 44 out of 481;
international startups financed at the level of the supply chain are 182 out of 481; startups leveraging the e-commerce field are 218 out of 481.
As we can see in Figure 6, solutions proposed by international startups leverage different technologies: software platforms, Big data and IoT especially.
Mapping the trend of the start-ups, the most relevant areas that startups are tapping into with their solutions are: food quality and sustainability; the usage of Big Data analytics both for planning production and exploring consumers’ preferences; the development and integration of solutions regarding Precision Agriculture (PA); IoT applications, sensors and wearable devices. Besides, about 50% of start-ups analyzed by the Smart Agrifood Observatory (Bellini, 2019)6 has implemented solutions for e-commerce, receiving funds for $ 2,7 billion.
There are four main principal categories regarding agri-food sector: e-commerce, constituted by solutions bound to the direct sale of products to final consumers; food delivery, e.g.
5 Bellini, M. (2019, February 9). "Significato, esempi e applicazioni pratiche". Retrieved from Internet4things: https://www.internet4things.it/iot-library/internet-of-things-gli-ambiti-applicativi-in-italia/ 6 Ibid. 0% 20% 40% 60% 80% 100% 120% Big Data Software platform IoT Mobility and georeferencing Device Cloud Drones Robot
Number of start-up Funds
Figure 6. Technologies adopted in innovative solutions proposed by international start-ups. (Bellini, 2018)
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platforms realized to aggregate and integrate firms offer, supporting ordering and delivering. Besides, B2B solutions for sale of input and raw materials to manufacturing firms; and aggregators, which correspond to those subjects that favor the information exchange between all the actors of the supply chain.
The distribution of start-ups with respect to their operating area is shown below in Figure 7:
As we can see, food delivery and e-commerce solutions are the most targeted operating areas by start-ups. 63% of Italian start-ups are involved in e-commerce solutions, 34% is involved in food delivery projects, only 1% is bound to B2B solutions and 2% has invested in devices enabling the creation of interconnected supply chain.
Another study of the Smart Agrifood Observatory analyzed the trends of startups in 2018 (Bellini, 2019)7.
A thousand startups have been analyzed: 98 Italian startups, operating actively in the agri-food sector, created between 2012 and 2018.
Observing Italian startups, the region with the largest number of startups involved in Smart Agrifood study is Lombardy, with 53% of total funds received. Subsequently, 17% of total startups are part of Emilia Romagna and they received 7% of total funds: a remarkable discrepancy. Figure 8 shows the variety in technologies implemented by these 98 Italian startups (a solution may be composed by different technologies).
7 Bellini, M. (2019, February 9). "Significato, esempi e applicazioni pratiche". Retrieved from Internet4things: https://www.internet4things.it/iot-library/internet-of-things-gli-ambiti-applicativi-in-italia/
63% 34%
2% 1%
E-commerce food Food delivery Aggregators B2B solutions
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As shown above, 42% of start-ups exploit Big Data but using it in two different ways:
Real time analysis: 16% of startups exploit Big Data analytics to monitor real-time crops humidity and temperature, weather conditions, water and air pollution level; Simulations and predictive analysis: 4% of startups using Big Data can exploit
agro-meteorological services to predict crop growth and forecast demand; create predictive analysis models to plan agronomic interventions ensuring food quality.
Distinguishing the different areas of action of the 98 Italian startups, Figure 9 shows that e-commerce (70% Food delivery, 20% Ee-commerce Food, 10% Other) and Agricolture 4.0 are the most interesting areas. Considering investments, 67% of total funds (€ 25.3 million) are bound to e-commerce startups and even though the number of startups involved in Agriculture 4.0 is high, they have received only 7% of total funds. 15% has been allocated to food quality theme, 9% to sustainability and 4% to traceability.
0% 5% 10% 15% 20% 25% 30% 35% 40% 45%
Big Data Mobile App IoT Device Drones Mobility Blockchain
Figure 8. Digital tools among innovative startups. (Bellini, “Scienze e applicazioni pratiche”2019)
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Among the 20 startups operating in the scope of Agriculture 4.0, open platforms have been developed in order to enable the integration of systems and data to provide farmers with efficient models to support their operating decisions. Their solutions touch different elements as shown in Figure 10 (Bellini, 2019)8.
Regarding the food processing industry in which 20% of Italian startups are involved in, innovation concerns monitoring and controlling systems of fields and traceability with respect to data management across the whole supply chain through the blockchain. 50% of solutions about traceability exploit the blockchain technology.
8 Bellini, M. (2019, February 9). "Significato, esempi e applicazioni pratiche". Retrieved from Internet4things: https://www.internet4things.it/iot-library/internet-of-things-gli-ambiti-applicativi-in-italia/ 48% 19% 12% 8% 6% 7%
Ecommerce Agriculture 4.0 Food quality Sustainability Traceability Other
Figure 9. Investments’ allocation to different fields of food sector (Bellini, “Scienze e applicazioni pratiche” 2019)
Figure 10. Agriculture 4.0 and its areas of intervention (Bellini, “Scienze e applicazioni pratiche” 2019)
0% 10% 20% 30% 40% 50% 60% 70% 80%
Remote crop monitoring Georeferencing Precision agriculture
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If we identify the category in which these startups are involved, we will see that the wine sector is proportionally the most financed. Fruit and vegetable industry, agriculture and agri-food are areas of action for startups, but the allocation of funds is higher in agriculture and fruit and vegetable sector (Figure 12).
As it is necessary to follow startups direction to understand in which areas next changes will happen, it is possible to define some conclusions. Firstly, more than half of Italian startups are focusing on creating e-commerce solutions, especially for final customers and food delivery. Secondly, agriculture 4.0 is emerging especially with the aim of reducing costs and optimizing resources, so by proposing Big Data analytics, mobile apps to monitor production processes and take actions real-time, exploiting technologies like IoT, sensors and drones. Besides, blockchain is tapping into the industry, and startups that are implementing this technology want to face counterfeiting and ensure the traceability of the whole supply chain.
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
Internal traceability Supply chain traceability Anticounterfeiting 0% 10% 20% 30% 40% 50% Food in general Agriculture Agri-food Wine Fruit and vegetable Cereals Milk
Funds Number of startups
Figure 11. Agriculture 4.0 and its areas of intervention (Bellini, “Scienze e applicazioni pratiche”, 2019)
(2019)
Figure 12.Allocation of funds and startups direction. (Bellini, “Scienze e applicazioni pratiche”, 2019)
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1.5 Public policies in support of the innovation processes of food industry
Innovation processes should be boosted by public policies that make available funds to support firms’ investments. Especially in the agrifood and agricultural sector, firms need a push: they are more sensitive to external conditions, as they must deal with variables they cannot control. Indeed, public policies are necessary to protect the competitiveness of this industry, by supporting sustainability, environmental-friendly harvesting systems and ensuring them the suitable opportunities to compete with foreign markets.
There are some structural characteristics of the primary sector. First, agri-food firms supply is quite rigid because it depends on natural factors: weather conditions like drought, flood and storms have an impact on the volume of production, so the offer is variable and does not ensure a profit. Besides, the farmer has a low bargaining power both upstream and downstream, as seed suppliers are multinational organizations and he/she is a price-taker. This means that as he offers a homogeneous product, he/she cannot request higher prices than competitors.
The gap between consumer demand and farmers supply is relevant, as they are not able to control and shape their supply rapidly according to demand changes. They have not the tools to overcome the information asymmetry existing between them, so it happens that they produce more than it is necessary or lower than requested (Trevisan, 2000).
On the one hand, foreign products from poorer countries cost less because of the lack of respect toward working conditions, raw materials’ origins and safety regulations, so they access Italian market with predatory prices; on the other hand, firms must survive with their small dimension that does not enable the deployment of significant machinery.
All these factors show how important it is to provide agri-food with relevant funds and supporting policies to help them being more competitive and more reactive to market changes.
1.5.1 Common Agricultural Policy (CAP)
For all these reasons, in 1957 Europe had created the Common Agricultural Policy (CAP) to realize a favorable market for all the Member States. Launched in 1962, it is a partnership between Europe and its farmers and agri-food firms. It aims at supporting farmers’ activities, by ensuring them a stable supply of agricultural products, reasonable life conditions, by protecting environment and sustainability of natural resources and by supporting the maintenance of rural areas (in Figure 13 the areas of investment are shown).
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CAP involves all the countries of the European Union. It is the most relevant expenditure of the European budget and delivers € 60 billion per year with respect to the total EU budget that is equal to € 160 billion (European Commission, 2019).
Two European funds contribute to the realization of the CAP: the European Agricultural Fund (EAGF) supports agriculture through direct funds; the European Agricultural Fund for Rural Development (EAFRD) provides funds for rural areas development.
CAP 2014-2020 objectives have been identified under three areas (European Commission, 2013):
economic goal, including food safety and quality matters. It monitors the declining rate of productivity growth, price volatility, the weakness of the role of farmers within supply chain both upstream and downstream;
environmental goal, with respect to sustainability, climate changes and biodiversity themes;
territorial goal, considering rural areas’ demographic, economic and social developments including relocation of businesses and depopulation.
With respect to previous years, environmental and social aspects have become more important in this reform. Through the achievement of these specific goals, it is possible to attain the three more general objectives of CAP 2014-2020 reform: viable food production, sustainability and
The EU supports farmers with € 58.82 billion
Income support Rural development Market measures
